Select Committee on Public Accounts Forty-Eighth Report


The Committee of Public Accounts has agreed to the following Report:




  1. Eliminating poverty is one of the greatest challenges facing the world. With over 1 billion people having to survive on less than $1 a day, the aid they receive must be well spent. Knowing what is effective in reducing poverty; understanding the conditions which help aid to succeed; setting appropriate targets which motivate those involved in development; and being able to identify progress or the lack of it are therefore important factors in the fight against poverty.
  2. The Department for International Development (the Department) lead the United Kingdom's contribution to global efforts to tackle world poverty. Under internationally agreed targets, the aim is to halve by the year 2015 the number of people living in extreme poverty. The Department provide aid in two main ways: bilateral programmes undertaken directly with individual countries and multilateral programmes run by organisations such as the European Union and the World Bank. In 2000-01, the Department spent 1.4 billion (50 per cent of their total expenditure of 2.8 billion) on bilateral aid and 1.3 billion (46 per cent) on multilateral aid.[1]
  3. The Department are recognised by their peers and by developing nations as having a leading role in international development. At the same time they face challenges common to all international development organisations, particularly the numerous factors that can influence development results, and the difficulty of measuring achievements.[2] Against this background and, on the basis of a Report by the Comptroller and Auditor General,[3] we examined how successful the Department have been in meeting their objectives. As a result of this examination we make five main points:

  • The Department should provide aid in ways, and in countries, which reflect more closely research on aid effectiveness. Countries with large numbers of very poor people and governments committed to poverty reduction benefit most from external aid. In addition, aid provided to support poor countries' own strategies for tackling poverty, and integrated with their governments' budgets has a more sustainable effect than supporting stand-alone projects. The Department have made progress in targeting their bilateral aid on the poorest countries, with increasing use of 'budget support'. But in 2000-01, 22 per cent of the Department's bilateral aid went to countries which, although they contained pockets of severe deprivation, were not poor countries overall and where aid could indirectly subsidise non-development activities.

  • The Department cannot ensure that the aid they provide through multilateral organisations is best applied to reduce poverty. In 2000-01, the Department provided 1.3 billion (46 per cent of their total aid budget) to organisations such as the European Union and the World Bank. But the Department have little direct control over how multilateral development organisations use these funds. The Department aim to influence how and where these organisations provide aid, but they have not yet succeeded in achieving their target of increasing the proportion of European Union aid which goes to poor countries.

  • The Department need to adopt performance targets against which they can measure their performance in reducing poverty. The Department operational staff have had either little knowledge of the Department's first two Public Service Agreements and associated priority performance targets or did not see them as key influence on their work. The short timescale of the targets has not fitted well with the slower emergence of evidence for development results. And targets have not been well structured to offer a balanced coverage of the countries and activities which the Department support. The next set of targets needs to take account of the way the Department manages their operations.

  • When planning their country programmes the Department do not quantify the poverty reduction they expect to achieve, and so cannot be certain that aid resources are being used cost-effectively. Programmes for helping to reduce poverty in individual countries are the main way in which the Department commit their bilateral aid. But the Department's country plans have lacked targets against which to measure progress; and have not identified the links between the resources allocated and the contribution they will make to reducing poverty.

  • The Department should give greater attention to evidence of poor governance and its effect on the aid they provide. The Department have carried out a number of governance assessments in recent years on individual countries. But they have not systematically assessed the quality of governance when drawing up plans for each of the countries in which they provide aid. The Department need to take a broad view of evidence on the quality of governance arising from all sources, including that relating to other donors' programmes or from local press reports or court proceedings.

  1. Our more specific conclusions and recommendations are as follows:
  2. Aid needs to be provided in ways which are most effective in reducing poverty

      1. The European Union does not make poverty reduction a priority when choosing which countries to aid, but in 2000-01 it received 55 per cent of the Department's 1.3 billion multilateral aid budget; a level of funding which is largely outside the Department's control. As a result, only 38 per cent of European Union aid went to poor countries in 2001 compared with 50 per cent in 1998 and the target of 55 per cent which the Department have been urging the European Union to achieve by 2002. This significant slippage threatens to undermine the effectiveness in reducing poverty of more than half of the Department's multilateral aid budget. We endorse the Department's commitment to work with the Foreign Office, the Treasury, other Member States and the international aid community to change European Union policy on aid to ensure that the United Kingdom's contributions are used as effectively as possible to reduce poverty.
      2. Only 2 out of 23 key targets in the Department's current Public Service Agreement address directly the effectiveness of their multilateral aid. Moreover, the strategies the Department have adopted towards individual multilateral organisations do not establish performance indicators to measure those organisations' effectiveness. In order to clarify their reasons for channelling aid through agencies beyond their direct control, whose main objective may not be poverty reduction, the Department need to identify indicators by which they can assess the poverty reduction performance of these organisations, as well as measures designed to show whether the Department are having the desired influence on the policies and practices of these organisations.
      3. The Department provide aid to countries which are not poor but which contain pockets of severe deprivation. These countries could do more to support their own poor if they chose to, and there is a risk that they could use external aid in order to free resources to fund non-developmental activities. The Department need to demonstrate that they have properly assessed the relative merits of such aid against competing demands from poorer countries.
      4. The Department need targets which promote cost-effective aid and give a fair view of their performance

      5. The Department, like all other main government departments, are required to set out their aims, objectives and targets in a Public Service Agreement against which performance is monitored. The Department's Agreement is built around helping to eliminate poverty in the poorest countries. They need these targets to provide a sharp focus on their priorities. But the current three-year targets do not sit well with the longer periods needed for development results to emerge, and provide only limited coverage of the range of the Department's activities or countries aided. The Department would rightly prefer their next Public Service Agreement to have a longer time frame and be more closely tailored to pursuit of the Millennium Development Goals.
      6. Performance against many of the Department's Public Service Agreement targets reflects not only the Department's work, but also the work of other donors and global economic factors. The Department consider that it is possible to establish plausible associations between their work and changes in the levels of poverty over time. It is difficult to isolate the Department's performance in reducing levels of poverty, however, and sometimes such associations are tenuous or difficult to make. The new target regime needs to be supported by a clear definition of the arrangements for monitoring progress towards them, and for deriving a fair and balanced view of the Department's contribution.
      7. The Department's ability to provide a reliable view of their performance has been constrained by the poor quality of data they have had to use to measure progress against their Public Service Agreement targets. They are working, both internationally and within individual countries, to address the poor state of statistical systems in many poor countries. When designing quantitative targets for their next Public Service Agreement, the Department should confirm that targets will be supported by data of sufficient quality and timeliness before those targets are formally adopted.
      8. The Department are failing to make the most of their evaluation studies to influence the design of aid projects and programmes because at project level, the results have not become available in time and few formal evaluations have related to country programmes. The Department plan to make their evaluations more relevant and timely. They need to evaluate their country programmes as a whole, and ensure that the results can inform reviews of spending and aid strategy. Where possible, the Department should undertake joint evaluations with other major donors to those countries.
      9. The Department need to improve how they assess the prospects of reducing poverty

      10. The planning of aid programmes for individual countries is the Department's main tool for choosing where and how to provide aid. But the resulting country strategies have often been insufficiently precise to inform decisions on the ground, and have not usually contained quantified poverty reduction targets. So the Department have not been able to analyse the degree of poverty reduction which could be expected to result from the resources they were planning to commit in a particular country. Future country planning needs to address these issues if it is to provide a proper basis for decisions on the use of aid resources - between countries as well as within them - and to secure the greatest possible reduction in poverty.
      11. A poor country can receive aid from more than 100 different donor organisations. Many poor countries do not have the administrative resources to deal with a large number of donors. Subject to an appropriate quality of governance, the Department have increasingly used budget support as a means of giving aid, which reduces administrative burdens and promotes national ownership of development programmes. They should also seek other ways of reducing the burden on developing countries, such as sharing expert personnel between donors.


  3. The approach of donor countries to the provision of aid has changed over the last 20 years. Strong state-domination was replaced in the 1980s by a more market-orientated view, while in the 1990s some state involvement was considered essential if aid was to be effective. Recent research has concluded that monetary aid is most effective when allocated to the poorest countries, especially those with governments which support poverty reduction. Over the last ten years, donors have also realised the importance of supporting countries' own strategies for reducing poverty rather than imposing their own—a focus on providing what a country needs rather than on what donors can readily deliver.[4]
  4. Figure 1 shows that the Department provide substantial funding to a number of multilateral organisations. Such funding is not always at the Department's discretion. Most of the Department's funding to the European Union, for example, is based on budgeted costs for the Union's aid programme, which are decided by the Council of Ministers and the European Parliament. The Department do not have direct control over the use of multilateral aid.[5] They told us that they have tried instead to influence how multilateral organisations worked but with mixed success. They have fared much better with the World Bank and the United Nations Development Programme, with whom they have worked to help redesign the organisations' poverty reduction strategies, than they have with the European Union.[6]

    Figure 1: The Department's contributions to multilateral development institutions, 2000-01 (total 1.3 billion)

    Source: National Audit Office (2002), Department for International Development: Performance Management - Helping to Reduce World Poverty (HC 739, Session 2001-02), Figure 14.


  6. The Department have a target to increase the proportion of European Union aid going to poor countries from 50 per cent in 1998 to 55 per cent in 2002. By the end of 2001, however, the proportion of Union aid going to poor countries had slipped to 38 per cent, with the remainder going to middle-income countries such as in North Africa, Latin America and parts of Eastern Europe. The slippage occurred because many Member States believe that aid should support foreign policy interests as well as poverty reduction, hence the greater focus on middle-income countries. The Department are actively involved with the Foreign Office and the Treasury in building up support from Member States who share the United Kingdom view that the prime purpose of aid is to reduce poverty, including working with the Foreign Office and the Treasury during their own negotiations in the European Union. The Department have also worked to promote this view of aid through other influential international bodies such as the Organisation for Economic Co-operation and Development.[7]
  7. While the Department recognise the importance of multilateral aid, they cannot easily measure the effectiveness of the funding they provide to multilateral agencies. Although 46 per cent of DfID's aid budget goes on multilateral aid, only two of 23 key performance targets are focused on measuring how well such aid is used. The Department told us that the predominance of targets focused on bilateral aid was a reflection of the need to get the right balance between targeting activities over which they had direct control and targeting the funding where they had to rely instead on influencing performance.[8] To underpin their funding of multilateral aid, the Department have developed strategies for influencing these international organisations and helping to improve their effectiveness. These strategies have included seconding staff from the Department to work within these organisations and building coalitions of support for the direction the Department wanted them to take. But the strategies have lacked any detailed performance measures or targets with which to measure the Department's success in achieving their objectives.[9]
  8. Despite promoting aid to poor countries as the most effective means of reducing poverty, nearly a quarter of the Department's bilateral aid (233 million) was given to better off countries in 2000-01.[10] The Department explained that although such 'middle-income' nations could not be described as poor, they did contain pockets of severe deprivation. These countries, however, often have substantial non-development public sector budgets, which creates a risk that aid from the Department and other donors could indirectly subsidise non-development related expenditure. The Department seek to mitigate this risk by concentrating their aid in parts of such countries where poverty is most severe; working with partners running programmes which are targeted at reducing poverty; and discussing the composition of governments' own public expenditure to try and achieve a greater focus on poverty reduction. The Department's main achievement in these countries is through influencing the attitudes of governments, leading to changes in such areas as economic policy, which can create far-reaching benefits for the poor.[11]
  9. In 2000-01, the Department provided aid directly to more than 140 countries but managed the programmes themselves in only about 60. The amount of bilateral aid provided to many countries is small, with over 100 countries receiving less than 10 per cent of the Department's total. This breadth of coverage brings with it a danger of dissipating aid effort and generating high administration costs. The Department agreed that they needed to focus on a smaller number of countries where their aid could make a real impact. They have therefore chosen a small group of countries around which to focus targets on improving the effectiveness of education and health care assistance.[12] Where the Department do not manage the programme, aid is often provided via non-governmental organisations, such as aid charities, which received a total of 184 million from the department in 2000-01. The Department have largely pulled out of some parts of the world, such as the Pacific region, where their programmes were very small with high administration costs; and where other donors already had much larger programmes in the area.[13]
  10. The Department recognise the need to control their administrative costs, some 77 million in 2000-01.[14] They are doing more to support government budgets rather than discrete projects, which tend to be extremely costly in administrative terms. They have also established agreements with some of the larger non-governmental organisations with the aim of reducing their overhead costs. Under these arrangements the organisations have received funds without the Department continually checking their use of the money, once their controls on expenditure have been assessed.[15]


1   C&AG's Report, para 1.7 Back

2   ibid, paras 4, 3.36-3.37; Qs 139, 172 Back

3   C&AG's Report, Department for International Development: Performance Management - Helping to Reduce World Poverty (HC 739, Session 2001-02) Back

4   C&AG's Report, para 2.14; Q148 Back

5   C&AG's Report, para 4.9; Ev 24; Qs 3, 101, 159-163 Back

6   Q2 Back

7   C&AG's Report, Figure 8; Qs 5, 47, 50-51, 53, 123-129 Back

8   Q3 Back

9   C&AG's Report, paras 2.23, 2.26; Q2 Back

10   C&AG's Report, para 2.19; Q32 Back

11   Qs 58, 135-137, 184 Back

12   C&AG's Report, para 4.25; Q32 Back

13   DfID (2001), Statistics on International Development 1996/97 - 2000/01 (Figure 14); Qs 32, 105, 107 Back

14   DfID, Departmental Report 2002: The Government's Expenditure Plans 2002-03 to 2003-04, Cm 5414 (Table 6, p108) Back

15   Qs 36-39 Back

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Prepared 1 August 2002